Health insurance rebates may show up in your mailbox

February 23, 2012

Health insurance premiums always seem to be on the rise. But in a new twist,
your health insurance company may be paying you if it's spending too much in
areas besides medical care and quality improvement.

Since last year, the Patient Protection and Affordable Care Act requires
your health insurer to spend at least 80 percent of the money it collects in
premiums on health care and improving quality. If too much was spent on other
costs - like marketing and salaries - in 2011, you could get a rebate this
year.

The medical loss ratio, which is also known as the 80/20 standard, requires
your health insurance company to tell you how it spent the money it has
collected. The medical loss ratio is used to set premiums.

The standard requires at least 80 percent of premiums to be spent on medical
care and quality improvement if you have individual insurance or are a member
of a small group plan. For members of a large group plan, at least 85 percent
of premiums should be spent on quality improvement and care.

Some health insurers have already reduced premiums as a result of the
standard, or upped their spending on quality improvement and medical care.

If they failed to do so, they'll need to refund money to their customers.

Rebates must be paid by August

The U.S. Department of Health and Human Services estimates rebates to
consumers or employers could total $323 million.

The money must be paid out by Aug. 1, and could be issued through premium
credits or actual rebates.

Some experts believe the move will force insurance companies to meet the
80/20 standard because they don't want to look bad to their customers.

But others anticipate unintended consequences. They fear the new rules will
force many small insurance brokers out of business because they won't receive
enough in commissions to be able to keep their doors open.

Those who buy their health insurance online would not be affected by the
move, but it could impact consumers who want to speak to a broker for insurance
advice.

A report by the Government Accountability Office found that in 2010, almost
two-thirds of health insurance companies already conformed to the 80/20
standard, even though the health care reform rule wasn't in effect at that
time.

Insurers serving the large group market were most likely to have met the
standard, while those serving individuals were least likely to have reached
that goal.